3938 Federal Register / Vol. 63, No. 17 /Tuesday, January 27, 1998 / Notices

1The two regulatory circulars that govern the use

of telephones at the equity trading posts were

approved by the Commission on October 28, 1996

[(see SR–CBOE–96–15, Securities Exchange Act

Release No. 37876 (October 28, 1996), 61 FR 56728

(November 4, 1996)] and on March 2, 1994 [See SR–

CBOE–93–24, Securities Exchange Act Release No.

33701 (March 2, 1994)].

2See SR–CBOE–96–15, approved in Securities

Exchange Act Release No. 37876 (October 28, 1996),

61 FR 56728 (November 4, 1996).

2(a)(19) of the Act (‘‘Disinterested

Trustees’’), will initially and at least

annually thereafter, in each year a

Registered Fund participates in the

insurance arrangement, determine (a)

that the Policy is in the best interests of

the Registered Fund and its

shareholders, (b) that any amounts paid

or potentially payable to the Mutual

Company by the Registered Fund

including, without limitation, the

premiums, the special assessable

premium, and the Fund Notes, are fair

and reasonable to the Registered Fund,

(c) after reviewing all claims paid or

denied by the Mutual Company, that the

settlement of all claims has been

reasonable and fair to the Registered

Fund, and (d) that any procedures

adopted pursuant to condition 3 have

been complied with.

2. Any conflicts that may arise

concerning the Participating Funds

relating to the operation or policies of

the Mutual Company will be resolved

on an equitable basis by a committee of

the Disinterested Trustees of the

Registered Funds.

3. The Trustees of each Registered

Fund, including a majority of the

Disinterested Trustees, will adopt

procedures that are reasonably designed

to provide that the conditions in the

application have been complied with.

The procedures will include, without

limitation, the guidelines set forth in the

Statement of Policy Regarding Coverage,

attached as Exhibit D to the application,

as it may be amended from time to time.

4. Participation by a Registered Fund

in the Mutual Company will be

consistent with the policy of the Fund,

as recited in its registration statement

and reports filed under the Act.

5. The nature and extent of the

insurance coverage will be briefly

described in each Registered Fund’s

current registration statement and, if

required by GAAP, in each Registered

Fund’s financial statements. Other than

this disclosure, the insurance coverage

provided by the Mutual Company will

not be used in connection with the

marketing of the sales of shares of the

Registered Funds.

6. Each Registered Fund will maintain

and preserve permanently in an easily

accessible place a written copy of the

procedures (and any modifications

thereto) described in condition (3) and

will maintain and preserve for a period

of not less than six years from the end

of the fiscal year in which any Fund

participated in the Mutual Company,

the first two years in an easily accessible

place, a written record relating to the

premiums paid and any claims made by

the Fund and any action taken by the

Mutual Company with respect to the

claim, and the information or materials

upon which the determinations

described in condition (1) were made.

The Mutual Company will make its

records available to the Trustees and the

staff of the SEC upon request.

7. The Mutual Company will pay

FMR for its commitment to cover losses

at a rate not to exceed the lowest rate

FMR would then be paying a bank for

a letter of credit in a comparable

amount.

By the Commission.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–1854 Filed 1–26–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39556; File No. SR–CBOE–

97–65]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Board Options Exchange,

Incorporated Relating to the Placing of

Orders Over the Outside Telephone

Lines at the Equity Trading Posts

January 16, 1998.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934, 15

U.S.C. 78s(b)(1), notice is hereby given

that on December 11, 1997, the Chicago

Board Options Exchange, Incorporated

(‘‘CBOE’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

the proposed rule change as described

in Items, I, II, and III below, which Items

have been prepared by the CBOE. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Chicago Board Options Exchange,

Inc. (‘‘CBOE or the ‘‘Exchange’’)

proposes to amend its policy 1 governing

the use of member-owned or Exchangeowned telephones located at the equity

trading post on the floor of the

Exchange.

The text of the proposed rule change

is available at the Office of the

Secretary, CBOE and at the Commission.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, Proposed Rule

Change

In its filing with the Commission,

CBOE included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. The CBOE has

prepared summaries, set forth in

sections A, B, and C below, of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, Proposed Rule

Change

The purpose of the proposed rule

change is to amend the policy currently

governing the use of telephones at

equity option trading posts. The

proposed amendment would permit

floor brokers at these posts to receive

orders, over telephones located at the

equity option posts, when (i) those calls

are patched through a booth on the floor

as further described below and (ii) the

order is from U.S. registered brokerdealers. The revised policy will be

issued in a regulatory circular. In

addition, the Exchange has filed as

Exhibit B to the filing a proposed form

of application and agreement to be used

by members seeking approval to use the

telephones at the equity option posts.

Orders Entered by Broker-Dealers

The proposed change is the latest in

a continual expansion of direct

telephone access of orders to the equity

option trading posts since a telephone

policy was first filed with the

Commission in 1993, see SR–CBOE–93–

24. The regulatory circular that was the

subject of that original filing prohibited

any orders from being transmitted over

the outside telephone lines at the equity

option posts. (At that time and today,

orders could and can be transmitted

over the intra-floor lines from one point

on the Exchange floor to another.) In

1996, the Exchange liberalized its

telephone policy in the equity crowds to

allow market-makers to place orders

over the outside telephone lines directly

with floor brokers at the equity option

posts.2 This change allowed marketmakers who need to be off the floor to

transmit their orders more efficiently.

The current proposed change would

expand the ability to transmit orders

entered by broker-dealers over
Federal Register / Vol. 63, No. 17 /Tuesday, January 27, 1998 / Notices 3939

3Equity option posts includes trading stations of

both market-makers and Designated Primary

Market-Makers where equity options are traded and

any other trading stations over which the Equity

Floor Procedure Committee has jurisdiction.

Persons transacting business in broad-based index

options traded at the same posts as equity options

will not be subjected to the restrictions of this

policy as long as the telephone lines are not used

in contravention of this policy in conducting

business related to equity options. The EFPC will

determine whether a particular narrow-based index

option is subject to this policy.

4 It should be noted that the Exchange filed (see

SR–CBOE–95–49) and the Commission approved

(Securities Exchange Act Release No. 37487 (July

26, 1996)) a more liberal policy concerning the

transmittal or orders over outside telephone lines at

the trading post for Standard & Poor’s 100 Stock

Index options (‘‘OEX’’). That policy permits orders

to be transmitted from any source provided the

broker accepting the order is properly qualified

under Exchange rules to accept the order and

provided the broker has received approval from the

Exchange to accept such orders over the telephone.

The Exchange generally has deferred to the

judgment of the various Floor Procedure

Committees in determining to what extent they

want to allow telephone access directly into the

trading posts over which they have purview. The

Equity Floor Procedure Committee recommended

taking a more limited approach than the OEX Floor

Procedure Committee but, after gaining experience

with this expansion, they may decide to offer access

to the same extent as the OEX Floor Procedure

Committee.

telephones located at the equity option

posts 3 where an order is transmitted

over the telephones on a three way call

involving the following persons at the

following locations: (1) a representative

of a member broker-dealer or its

correspondent firm from a location from

off of the Exchange trading floor, (2) a

CBOE broker or an associated person of

such broker including a Designated

Primary Market-Maker (‘‘DPM’’) acting

in his capacity as a floor broker, at a

booth on the floor of the Exchange, and

(3) CBOE floor broker (including a DPM)

or other person authorized to receive an

order at an equity trading post on the

floor of the Exchange.

In determining to limit the transmittal

of orders in this proposal to orders from

member broker-dealers and their

correspondent firms, the Exchange has

adopted the Equity Floor Procedure

Committee’s recommendation.4 It is the

judgment of this Committee which

oversees trading at the equity option

posts that it would be best to continue

to expand telephone access to the equity

option posts on an incremental basis.

Because of concerns with the potential

for error (and thus liability) in accepting

orders from a wide range of customers,

the Equity Floor Procedure Committee

determined to limit access to this class

of broker-dealers only. The requirement

that the call must involve a person at a

booth on the floor of the Exchange will

help to ensure that there is a further

record of the order in the event that a

dispute arises later in connection with

the order. The Equity Floor Procedure

Committee and the Exchange will

monitor the policy and determine

whether a future expansion in line with

the OEX model is appropriate. As with

the use of telephones at the OEX trading

post, the Exchange intends to police

compliance with the conditions

applicable to the use of telephones at

the equity trading posts by means of

customary floor surveillance

procedures, including reliance on

surveillance by Floor Officials and

Exchange employees. Floor brokers

accepting orders in this manner would

not be required to be qualified pursuant

to Exchange Rule 9.1 as with brokers

accepting orders of public customers

over OEX post telephones because the

qualification requirements do not apply

to the acceptance of orders from

registered broker-dealers. However, the

Department of Compliance will be

required to review and approve all

applications to ensure that the applicant

is not intending to transact business

which the applicant is not authorized to

transact.

Application and Agreement

In order to implement the change in

the policy, the Exchange is also seeking

approval of a proposed form of

application and agreement that

members will be required to submit to

be approved to use the telephones at the

equity option posts pursuant to the

revised policy. This application and

agreement is nearly identical to the

application and agreement used for OEX

post telephones which was approved by

the Commission, except to the extent

that the agreement sets forth terms of

the equity telephone policy that are

different from the terms of the OEX

telephone policy. The Exchange has

determined to file the application and

agreement for approval because it

contains some provisions that have not

otherwise been approved specifically for

use of telephones at the equity option

posts. Among the provisions in the

application and agreement are

paragraph G and H which deal with

liability issues. Paragraph G states that

the Exchange shall not be liable to

members of their customers for losses

resulting from the installation,

operation, relocation, use of, or inability

to use telephones or telephone lines at

an equity option post. Paragraph H

requires the member to indemnify the

Exchange against any liabilities arising

out of equity post telephones or lines.

The application and agreement will

require an applicant to receive approval

of the Department of Compliance as

well as the Equity Floor Procedure

Committee, as indicated on the form,

before the Telecommunications

Department may authorize a line or

telephone to be installed. Before

approving a telephone request, the

Department of Compliance will review

the application and contact the

applicant if any questions are raised

about the intended use of the telephone

line.

Upon approval of the proposed rule

changes, the Exchange will issue a

regulatory circular substantially the

same as Exhibit A to the submitted

filing. The Exchange will implement

these changes within sixty days of the

approval of the changes.

The proposed rules are consistent

with and further the objectives of

Section 6(b)(5) of the Securities

Exchange Act of 1934 in that they are

designed to improve communications to

and from the Exchange’s trading floor in

a manner that promotes just and

equitable principles of trade, prevents

fraudulent and manipulative acts and

practices, and maintains fair and orderly

markets.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

CBOE does not believe that the

proposed rule change will impose any

burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

No written comments were solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

(A) by order approve such proposed

rule change, or

(B) institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,
3940 Federal Register / Vol. 63, No. 17 /Tuesday, January 27, 1998 / Notices

5 17 CFR 200.30–3(a)(12).

1The Intermarket Surveillance Group (‘‘ISG’’) is

an organization of securities industry self-regulatory

organizations formed in 1983 to coordinate and

develop intermarket surveillance programs

designed to identify and combat fraudulent and

manipulative acts and practices. In order to

promote its purposes, members agree to exchange

such information as is necessary for ISG members

to perform their self-regulatory and market

surveillance functions.

Washington, D.C. 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of CBOE. All submissions should

refer to the file number in the caption

above and should be submitted by

February 17, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–1855 Filed 1–26–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39557; File No. SR–CHX–

97–33]

Self-Regulatory Organizations;

Chicago Stock Exchange; Notice of

Filing of and Immediate Effectiveness

of Proposed Rule Change Regarding

Regulatory Cooperation

January 16, 1998.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on December 11, 1997,

the Chicago Stock Exchange,

Incorporated (‘‘CHX’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’ or ‘‘SEC’’)

the proposed rule change, as described

in Items I, II, and III below, which Items

have been prepared by the selfregulatory organization. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of The Terms of Substance of

the Proposed Rule Change

The Exchange proposes to amend

Article VIII, Rule 11 of its Rules to

clarify the existing Rule and to require

regulatory cooperation by members,

member organizations, and others over

whom the Exchange has jurisdiction in

connection with certain investigations

and proceedings that are initiated by

other exchanges or self-regulatory

organizations.

II. Self-Regulatory Organization’s

Statement of The Purpose of, and

Statutory Basis For, The Proposed Rule

Change

In its filing with the Commission, the

Exchange included statements

concerning the purpose of and basis for

the proposed rule change and discussed

any comments it received on the

proposed rule change. The text of these

statements may be examined at the

places specified in Item IV below. The

Exchange has prepared summaries, set

forth in sections A, B, and C below, of

the most significant aspects of such

statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

Currently, Article VIII, Rule 11

requires members (and certain others) to

submit books and papers, furnish

information, and appear and provide

testimony to the Exchange’s Board and

other committees or officers of the

Exchange, among other things. While

the Exchange believes that the current

rule provides adequate authority to

require members (and others specified

in the rule) to provide information to

other regulatory organizations, the

Exchange believes that clarifying this

provision to expressly provide for such

information is desirable, especially

because other self-regulatory

organizations have recently amended

their rules to clarify their informationsharing authority.

The proposed rule change would

expressly provide that no member,

member organization, or partner, officer,

director or other person associated with

a member or other person or entity

subject to the jurisdiction of the

Exchange shall refuse to appear and

testify before another exchange or selfregulatory organization in connection

with a regulatory investigation,

examination or disciplinary proceeding,

or refuse to furnish documentary

materials or other information, or

otherwise impede or delay such

investigation, examination or

disciplinary proceeding if the Exchange

requests such information or testimony

in connection with an inquiry resulting

from an agreement entered into by the

Exchange with other exchanges or selfregulatory organizations with whom the

Exchange has entered into agreements

for the sharing of information and other

forms of mutual assistance, including

but not limited to members and affiliate

members of the Intermarket

Surveillance Group.1 The proposed rule

change would explicitly provide that

the Exchange may enter into agreements

with domestic and foreign selfregulatory organizations providing for

the exchange of information and other

forms of mutual assistance for market

surveillance, investigative, enforcement

and regulatory purposes. The

requirements of the proposed rule

would apply regardless of whether the

Exchange had itself initiated a formal

investigation or disciplinary proceeding.

The proposed rule change would also

provide that any person or entity

required to furnish information or

testimony pursuant to the new rule

must be afforded the same rights and

procedural protections as that person or

entity would have if the Exchange had

initiated the request for information or

testimony.

While the Exchange believes that the

current rule provides adequate authority

to require members and specified others

to provide testimony, documentary

materials or other information to the

Exchange’s Board or to the Exchange (or

any committee, subcommittee or officer

thereof) and refrain from impeding or

delaying any examination, inquiry, or

investigation (whether formal or

informal) the Exchange believes that

changes are desirable to conform this

text to the new provisions added above.

Specifically, the proposed rule change

would provide that no member, member

organization, or partner, officer, director

or other person associated with a

member or other person or entity subject

to the jurisdiction of the Exchange shall

impede or delay an Exchange

examination, inquiry or investigation

(whether formal or informal) with

respect to possible violations within the

disciplinary jurisdiction of the

Exchange or with respect to possible

limitations on access to Exchange

services or otherwise with respect to the

discharge of its duties nor refuse to

furnish testimony, documentary

materials or other information requested

by the Board of Governors or by the

Exchange (or by any committee,

subcommittee, or officer thereof) during